For US Retailers, a Competitive Threat from Overseas

US retailers are fighting hard to compete for consumer wallet share, and they are not just competing against each other.

A record 47% of US online consumers said they have made at least one online purchase from an international retailer this year, up from 43% in 2016, according to the UPS Pulse of the Online Shopper study, released Wednesday at the IRCE conference in Chicago. The study, conducted by comScore for UPS, surveyed more than 5,000 US online shoppers who’ve made at least two web purchases in three months.

Many shoppers said they bought from an overseas seller because the products didn't seem available from local merchants: more than one-third of those who bought from an international seller said they did so because they couldn’t find those products at home.

But lack of local options was not the only reason for buying from international sellers. More than two-fifths of the respondents, or 43%, said they made that purchase not only because they found a lower price but because those sellers are on a US marketplace like Amazon.

“It’s a lot easier (for US consumers) to buy from international retailers,” said Louis DeJianne, director of retail strategy at UPS, in an interview. “Retailers in the US need to pursue an international strategy. Thinking about things in the global perspective is important.”

The stakes of the game are high. One counter strategy US retailers are employing is selling to overseas customers themselves. Part of UPS’s common conversations with US retail clients is about how they can build their presence internationally, DeJianne said.

It’s also become a high-stakes game for shippers like UPS. In fact, in part to respond to increasing cross-border demand from US brands selling to international customers, UPS has expanded its presence in countries including Ireland, Morocco, Poland and China, and has inked joint partnerships including a recently announced venture with the parent company of China’s express delivery service, SF Express.

UPS also owns i-parcel, a cross-border logistics service that it acquired in 2014 to help retailers selling to overseas shoppers figure out things such as how to sell in customers’ local currency and language. UPS rival FedEx also has a similar service, also through an acquisition.

UPS now ships nearly three million packages a day internationally, up 12%, compared to the 2.6% growth in US package shipment to 15.6 million, the company said in its Q1 earnings announcement in April. It said that cross-border ecommerce shipments from the US were a key contributor to its international growth.

Nearly two-Fifths of shoppers start their online product search at a marketplace.

Fighting off international competition and designing a sell-abroad strategy is only one big challenge facing US retailers. The study also suggested that retailers need to think closely about a marketplace strategy and where they advertise their products: 38% of consumers start their online product search at a marketplace—most commonly Amazon—up from 35% last year. In comparison, the percentage who cited Google and other search engines was far lower, at 15%.

Meanwhile, the percentage of online shoppers who began their search at retailers’ own websites, stores or apps has declined to 29% from 31%.

“People are going [to marketplaces] to search and buy," DeJianne said. "You have to have some sort of presence on the marketplace.”

In a comforting sign, while free shipping options remain critical for consumers, and cited by 74% of consumers as the most important option when they check out online, that percentage has actually dropped from 81% in 2014. Instead, time is prized: 75% of consumers said they are willing to pay a premium for expedited shipping.

On the return front, the study signaled that there may be an opportunity for brick and mortar retailers to turn that into an advantage to drive traffic and purchases.

Even though 75% of online shoppers said they’ve shipped a return back to a retailer, outpacing the 45% who said they returned to a physical store, two-thirds of those who returned to a store actually made a new purchase, compared to a little over two-fifths of those who made a new purchase online when choosing to ship their returns.

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